【Overly,Localization,Overruns,B&Q】 B+侦探

　　When Wei Zhe resigned from the president of B&Q China in 2006, leaving a booming business to be praised, no one has expected that this Britain-based home improvement retailing giant could suffer the loss for six straight years from then on.
　　Kingfisher Group from Great Britain recently published the financial report of the first quarter of this year, showing that its subsidiary company B&Q’s sales volume in China decreased by 6.8% and its losses reached 50 million pounds. This is the sixth year that B&Q China was reported with losses. Such a performance could not live up to its name as the European largest home improvement retailing market in China.
　　At the beginning of this year, B&Q closed its store in Daqiao District, Nanjing, Jiangsu and the number of its stores in China was reduced from 64 at the heyday to 39 at present.
　　From the previous No. 1 in the Chinese market to the present 6-straight-year-loss victim, B&Q’s performance in China is like taking a roller coaster. What’s to be blamed for the drastic decrease includes the “stagnant development of the home improvement industry due to the policy control-caused depression of the Chinese property market” as it listed in the contents. But more importantly, its improper judgment in its business pattern and impotent management are the major defendants.
　　 The Maze in China
　　B&Q’s dilemma in China is caused by simply copying the profit pattern from Gome and Suning– two largest home appliance retailers in China– without gaining that much say in the home improvement market as Gome and Suning in the home appliance retail market.
　　The B&Q store located in the Huangxing Road, Shanghai, went through a boring day with a few customers on the afternoon of August 6, a sharp contrast against the huge number of customers coming into and out of the RT Mart opposite to it. Actually, the B&Q workers are used to this situation as “it became so frequent from 2007”.
　　The financial report shows that B&Q lost 12 million pounds in China in 2007, a very pale performance in front of the profits of 8.3 million pounds a year before.
　　In that year, B&Q was shown in front of the public with great embarrassment. In that June, Shanghai-based cupboard maker Yadier could not endure the endless default on the payment of its 16-million-yuan commodity. Dozens of its employees rushed into the headquarters of B&Q China. Yadier’s action was immediately followed by several suppliers of B&Q China. These suppliers united together to summon a press conference to voice against B&Q. 　　Then, various kinds of commissions or fees B&Q were charged from its suppliers were exposed, including the “fees of installation services, consultancy services and advertising rebate”. According to the data from Yadier, from 2005 to 2006, B&Q China cut 12 million yuan of income from what this cupboard maker deserved in the name of “installation service, consultancy, sales promotion, advertising rebate, cost reduction, display” and so on.
　　Dr. Li Wei with the Franchised Operating Research Center at the China University of Politics and Laws, said that B&Q China simply copied the profit pattern of Gome and Suning, which is to earn profits through different charges from the suppliers instead of the difference of commodity prices. However, it did not absorb the “maneuver”of the two companies in building distribution channels, which did not give them a big voice in the market.
　　Zhang Qingsong, former director of B&Q in Xi’an, said that the supplier-retailer tension caused by various kinds of unreasonable charges and the overly heavy reliance on the decoration centers created a deformed pattern of B&Q. Decoration centers were once considered the “money-giver”for the sales of B&Q’s stores and it could at most drive the sales revenue of stores up by 50%. In the management structure, the decoration center is independent from the retail department but its existence relies on these stores.
　　“A single customer might only spend 20 yuan buying a water tap. But if a decoration business is dealt, the income might amount to 100 thousand yuan,” said Zhang Qingsong, With that thought, B&Q required the store to center around the decoration and to pull all possible customers into the center. This “upside down” pattern clearly results in the lack of staff responsible for commodity display and user experience as everyone is thinking of how to improve their income by recruiting a customer for the decoration center.
　　Chen Zhangli, a researcher in the home improvement industry of the China Investment Consulting, thought that B&Q China had no core advantages in the home improvement business in China and its decoration level was not a counterpart of professional decoration companies while the price is 10% higher. In addition, in the pattern that combines the decoration and retail together, B&Q required that 85% of the decoration materials to be supplied by the B&Q stores. Such an imposing treaty is unacceptable in the market. Without a prominent advantage in its core business, its decoration business also encountered a lot of problems and the difficulties to survive. 　　There are a lot of secrets in the decoration business. “So far as I know, many designers of B&Q’s decoration center received the orders from stores and finished the business in the name of themselves, causing the zero income of B&Q from these orders,” Zhang Qingsong said. “Without an efficient management system, these “empty orders” are very common in China. The only result is that ‘designers earn a lot of money while companies suffer losses’.”
　　What’s worse is that B&Q China has no method to ease this situation. It is said that designers doing private decorating business by themselves is very common in that industry and the lack of management of B&Q in China worsens this situation.
　　In addition, B&Q’s general management system was criticized by a former director of B&Q’s store. He said that the departments of market, purchasing, direct sales and so on of a store are managed by both the store director and the (regional) headquarters. The position of read line in the enterprises is determined by the influence of its director in the company. Some strong departments can even take other departments’ business, reflecting the chaos of the corporate management.
　　 The Excessive Localization
　　The expansion regardless of everything and the shortage of capable talents led to the disparities in the profitability of different stores. Chaos occurred to B&Q’s management at this moment while the corruption cases were frequently reported and the supplier-retailer relationship dropped to the frozen point.
　　According to some employees serving B&Q, this is a company that is fully, if not overly, localized and its style was determined when it got into China. In 1999, B&Q opened its first store in Shanghai, marking the start of its expedition in China.
　　The current team of senior executives of B&Q China included Tian Hao, who once founded the first home improvement material retail market in China. He was appointed president of B&Q China and given the dominance in the business operation. Tian Hao was assisted by six vice presidents, with two of them coming from foreign countries. When interviewed by the media, Tian Hao positioned himself as a “revisionist” and he planned to localize B&Q in China with every measure he took.
　　The biggest “surgery” Tian Hao made to B&Q China is to turn the profit pattern of B&Q China into the one of “decoration center and large retail supermarkets”, adding the decoration center into the “supermarkets” that can not be seen in the British market. In Europe, B&Q is positioned as to provide convenience for the people favoring DIY when it comes to home improvement. In Europe, the high labor cost helps to spread the DIY concept and the business model of B&Q can be widely spread. 　　After B&Q’s entry in China, this concept is unacceptable for Chinese people. Thus Tian Hao combined the decorating business with the retail and developed a new section called “CIY – Create It Yourself” to provide people without construction and decoration experiences with the support ranging from design, material selection and implementation. It founded a “B&Q Decoration and Design Center”, aiming to drive the sales of shopping malls with branded decoration centers.
　　This pattern is really helpful for the fast development of B&Q in China.
　　In the sales list offered by the China Association of Chain Operation in 2002 shows that B&Q China took the champion in the total sales and the sales per store. According to the public data, B&Q realized the income of 1.4 billion yuan in that year.
　　However, Tian Hao left at this tremendous year. A former executive of B&Q China said that Tian Hao resigned due to the conceptual conflicts between him and the British headquarters. For example, Tian Hao’s idea of promoting CIY while giving up DIY was serious objected by the British headquarters. Looking back what Tian Hao had done to B&Q China, we will find that some of his measures were very necessary at that time. But pitifully, B&Q finally got too far in the way of localization in China.
　　The one taking the place of Tian Hao was called Wei Zhe, a Shanghainese who once served in the financial field. Wei Zhe continued Tian Hao’s business operation but he advocated the strategy of fast expansion when it came to the development pattern. He acquired the 13 Chinese stores of B&Q’s competitor OBI from Germany. When Wei Zhe resigned from B&Q China in 2006, the number of B&Q stores in China increased drastically from 8 to 60 and together they contributed to the retail profits of 8.3 million pounds to its parent year. This was the last year that B&Q saw profits in China.
　　“In spite of the unprecedented boom at that, Wei Zhe cannot be said to achieve success in B&Q when he left,” several former executives of B&Q China said unanimously. The unplanned expansion and the failing fostering and reservation of capable talents result in the difference of profitability of stores. The chaos began to appear in the management of B&Q and internal corruption cases were frequently heard along with a worsening supplier-retailer relationship.
　　A case from the court revealed that four sales representatives and managers of B&Q in Shanghai once falsified the cases of customers’ returning goods to embezzle the corporate assets from November 2006 to June 2007 before they were found by the headquarters of B&Q China. 　　“If B&Q enhanced its supervision and regulation over their employees and check over the sales, returning goods and inventory regularly, these things would not happen,” said an insider from the court. It is certain that similar thing happened frequently in China.
　　 Incapable Self Rescue
　　B&Q’s illness in China is considered to be a result of its too heavy reliance on the decoration business and the ignorance of user experiences and result improvement of retail business.
　　When B&Q suffered continuous failure in China, its major local rivals, including Red Star Macalline and Easy Home, initiated their fast expansion. Though their crazy expansion was somewhat attributed to the capital operation, it is undeniable that B&Q has met unprecedented challenges after the short-term boom in 2005 and 2006 in front of the furious competition launched by local competitors.
　　However, B&Q did not take measures of self rescue when facing the decreasing sales. It was not until the second half of 2008 when people realized that this international giant had met decayed business in China it closed three stores in Qingdao, Fuzhou and Shenzhen.
　　In May 2009, B&Q secretly launched the Plan of Transformation (T-Plan in short), aiming to upgrade and reconstruct the remaining 41 stores in China. As announced by B&Q China at that time, the upgraded and reconstructed store would see improvement in image, distribution design, product display, product category and customer services.
　　It is known that B&Q invested about 40 million US dollars in the plan of boosting its performance in China. The images of stores were changed, and the professional and well-trained employees of B&Q replaced the sales-promotion staff of suppliers, hoping to provide indiscriminate services for customers and create better shopping experiences. In addition, Matt Tyson, CEO of B&Q Asia, said that “B&Q would pay more attention to retail and consumers and reduce the proportion of decoration business in the company’s profits”.
　　“Previously, half of our sales revenue in China came from the decoration business – too big a proportion. In the future, B&Q China would improve its presence in the field of retail to balance the two core business of retail and decoration,”Tyson said.
　　In Zhang Qingsong’s opinion, the “T-Plan”of B&Q has a definitive goal. The reconstruction of stores was to close some underperformed stores and reduce the average size of each store to reduce the operating cost. The self-employed salespromotional staff is good for improving the experience of customers. In addition, it could address the problem of excessive reliance on the decoration business. 　　However, after three years of carrying out the“T-Plan”, tiny effect was seen. With the closure of B&Q’s store in Nanjing at the beginning of this year, the number of its stores reduced by one third in three years.
　　In addition to the vainly attempt to get rid of losses, B&Q and people caring about this company never saw expected changes. As Zhang Qingsong said, the proportion of decoration business keeps increasing and the self-employed workers are just carriers of goods while introduction to commodities is still done by sales representatives of suppliers. This is definitely different from the said goal of B&Q’s “T-Plan”.
　　“The implementation of T-Plan reveals big problems in the internal management of B&Q China,” said Chen Zhangli from China Investment Consulting. The inefficient implementation is to be blamed for the failure to realize the goal of “T-Plan”.
　　According to the newsletter of B&Q China, most consumers in China have no experience in home improvement business and are confused in selecting the materials. Therefore B&Q lists very detailed introduction to the consumers and the suppliers also send its own people to help consumers have a better understanding of their products.
　　“The T-Plan is still on the way. It is too early to say that it failed or not,” said the newsletter.

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